While retail trade levels have been rather rocky, this has not dampened demand for space by retailers.

Research by Knight Frank shows local Sydney CBD retail market has been performing strongly and as a result has been keeping vacancy levels low at 2.9 per cent as at of November 2012.

This tight vacancy environment has been witnessed both in the City Centres of 2.7 per cent and the Strip of 3.6 per cent. Occupancy has been strong across all centres. Some centres which historically had some difficulties, particularly in upper level tenancies, are now showing close to full occupation. In between tenancies, there has been an influx of “pop-up stores” which require minimal fit out and keep occupancy levels inflated.

At the same time, the retail mix has shown a difference in trade by location and by centres. Strip retailing has a high concentration on Other Retailing (Personal) which includes jewellery and the Finance and Insurance sub sector.

Clothing and Soft Goods is the predominant sub class across the total CBD despite the drop in discretionary spending. The largest change in the CBD has been the emergence of concept stores and international retailer’s requirement for flagship locations, such as Zara and Topshop. This has grown the store footprint from the traditional CBD retailers.

Looking ahead, despite the tight Prime Core vacancy and demand by large space users, average rents for Prime street front/strip property will remain steady with some small increases possible. While arcade, upper levels and more secondary locations are likely to see rents remain under pressure. Retail assets will continue to be highly sought after by Private Investors particularly in the lower sub $5 million price range which provides a competitive yield.